SELF CERT MORTGAGES AND THE CREDIT CRUNCH
The credit crunch is everywhere - on TV, in newspapers and on the lips of friends and family. It’s the reason house sales are at record lows, it’s the reason no one can get a mortgage and it’s the reason that a lot of bankers are sweating profusely. But what has it done to self cert mortgages? If you took out a self cert deal a few years ago, or even shopped for one previously, things look a whole lot different now. But why? How has the credit crunch affected your potential to get hold of self cert mortgages?
The credit crunch is a media term given to what has happened in the ‘credit markets’ right now. In years gone by, mortgage lenders have bought whole sets of mortgages from other lenders, which will hopefully make them a profit. These are considered credit in the banking world - packets of money-making potential, if you like. Lenders can then lend even more money on the back of these, in affect creating mortgages from mortgages. For years this has worked wonderfully, and made things so cheap all self cert mortgages were great deals. But of course last year everything changed.
A lot of the mortgages sold to companies, including many British companies, were American self cert mortgages. And these were sold very badly - so badly in fact that self cert deals are now known as ‘liar loans’ in the USA. The credit was bad as lots of American people were missing mortgage payments, so lenders lost money in arrears and repossessions. And because these sets of mortgages were sold all over the world, everyone lost money, and now no one is buying these mortgages anymore, so lenders don’t have the credit available to make cheap mortgages. These self cert lenders have been hit harder than most.
Most risky mortgages of the last few years were created by lenders who dealt in the international mortgage market. Because that has now dried up, many of the self cert lenders have had to pull all of their mortgages and cease trading.
So if you have been searching and searching without luck, maybe it is because there are a lot less people selling self cert mortgages. But that doesn’t mean there are no lenders available. Remortgages and buy-to-let mortgages are still healthy, as are some selected new self cert mortgages. But because the lenders have no funding, their deals are a lot more expensive. They are also wary of a repeat performance of what happened with the American self cert borrowers, so their criteria are very strict.
The credit crunch has not destroyed self cert mortgages completely, but it has dented their availability severely. Many people are confident that self cert mortgages, which have helped many people for many years, will bounce back and will be sold freely once again - it’s just a matter of waiting for the credit crunch storm to die down.
Brought to you by Self Certification Mortgage UK